Washington now has the highest gasoline prices of all 50 states, the Seattle Times reported June 21. The story was broken the day before by the San Diego Union, which offered it as a good-news story: California’s prices were no longer the highest.
The Union quotes the web page gasbuddy.com, which lists average gasoline and diesel prices in the most expensive 25 states. As I write, Gasbuddy lists these as the top six average statewide prices at the pump for unleaded gasoline: $4.875 Washington; $4.799 California; $4.707 Hawaii; $4.529 Oregon; $4.234 Nevada; $4.108 Alaska. Idaho was further down the list, at $3.952.
The newspaper stories say the cause of the high prices in Washington is the “cap-and-invest” law passed by our Democratic legislature a couple of years ago. The law set up a carbon-pricing program modeled on the nation’s only other one, in California. Washington’s law creates a state auction for permits to emit carbon dioxide. Industries that emit CO2 are required to bid against each other for the permits. The largest such industry are the oil refiners, who have refineries around Bellingham and Anacortes.
A year ago, the Washington Policy Center in Seattle — a free-market group critical of Cap and Invest — estimated that the state’s program could raise the price of regular gasoline in 2023 by 46 cents a gallon, and diesel by 56 cents. The Policy Center has a conservative bias, so progressive Seattle figures it’s O.K. to ignore it — except that in hindsight, its estimates were remarkably accurate. After two auctions held earlier this year by the Department of Ecology, the right to emit CO2 in Washington is now valued at about $48 a ton. That adds 44 cents a gallon to the cost of manufacturing gasoline, and nearly 55 cents for diesel.
And Washington now has the highest gasoline prices in the nation. This is not what state officials said would happen. A year ago, Fox News quoted Governor Jay Inslee as saying, “This is going to have a minimal impact, if any. Pennies.” On Jan., 11, 2023, before the first auction, Luke Martland, who heads the Cap and Invest program at the Department of Ecology, argued with Sen. Drew MacEwen, R-Shelton, about an estimate of 20 cents a gallon. MacEwen said it could be that high, and Martland argued against it.
But it isn’t 20 cents. It’s closer to 50 cents.
Having bid up the price of the CO2 permits that the state requires them to have, the refiners have now passed along the cost to consumers. Considering that the state has squeezed the refiners in the two auctions for more than $850 million — what would you expect?
And further, the people who invented “cap and trade,” which is what the system is generally called, wanted the oil companies to pass on the cost to consumers. The program’s purpose is to prod people into using less fossil fuel, and ultimately to switch to electric cars and trucks. If the program isn’t raising the price of gasoline and diesel, it’s not working.
There is a logical argument for making you pay more. Fossil fuels have long-term costs of pollution and climate change. The oil companies don’t pay those costs and they haven’t been passing them on to you. The cap-and-trade idea is to make them pay, and thereby make you pay, so that you will have an incentive to switch to electric cars and other applications of “clean” fuel.
Washington’s Cap and Invest law exempts farmers and fishermen. From an environmental view, this makes no sense. Agriculture, for example, is a big user of fuel — for pumps, tractors, trucks, and other equipment. If you want farmers to switch to clean fuel, why exempt them? From an economic view, it’s a different matter. Washington’s farmers produce wheat, apples, potatoes, and other products for national and international customers. Sticking them with a 50-cent-a-gallon penalty will put them at a competitive disadvantage. The fishing industry can say the same, as might some other industries that don’t have the same political clout.
Here is the larger problem. Even assuming that the Department of Ecology sets up the program right, auctioning off the right amount of CO2 to get us to change our behavior by the right amount — big ifs — why would the Evergreen State do this all by itself? The thinking seems to be that we have to set an example for other states to follow.
But what if we’re setting an example for other states NOT to follow? Washington has 2 percent of the population of the United States. Are the other 48 states, after us and California, going to say, “Hey, let’s do what they’re doing! Let’s raise the price of gas!” Their answer might be, “Let’s not.” And the ultimate purpose for the people of Washington to pay another 50 cents a gallon for gas is to save the planet. But our 7.74 million population is less than one-one-thousandth of the population of the planet.
Will we be the tail that wags the dog, or just a tail that wags?